Analysis of the Economic Contribution of Constructing the New International Trade Crossing: A New Bridge Linking Detroit and Windsor by June 2012 The statements, findings, and conclusions herein are those of the authors and do not necessarily reflect the views of the project sponsors. Economic Contribution of Constructing the New International Trade Crossing ii Center for Automotive Research Analysis of the Economic Contribution of Constructing the New International Trade Crossing: A New Bridge Linking Detroit and Windsor Center for Automotive Research 3005 Boardwalk Ann Arbor, MI 48108 www.cargroup.org Report Prepared by: Kim Hill Director, Sustainability & Economic Development Strategies, Director, Automotive Communities Partnership Richard Wallace Director, Transportation Systems Analysis Debbie Maranger Menk Senior Project Manager Joshua Cregger Industry Analyst June 2012 The statements, findings, and conclusions herein are those of the authors and do not necessarily reflect the views of the project sponsors. Economic Contribution of Constructing the New International Trade Crossing iii Center for Automotive Research Economic Contribution of Constructing the New International Trade Crossing iv Center for Automotive Research TABLE OF CONTENTS EXECUTIVE SUMMARY ________________________________________________ 1 INTRODUCTION ______________________________________________________ 3 METHODS ___________________________________________________________ 3 ESTIMATED EMPLOYMENT IMPACTS OF NITC _____________________________ 4 Employment from Bridge Construction ____________________________________ 4 Employment from Federal Matching Funds _________________________________ 5 Employment from Bridge Operations _____________________________________ 6 Employment from New Private Investment _________________________________ 6 CONCLUSIONS _______________________________________________________ 7 REFERENCES ________________________________________________________ 8 APPENDIX A: NEW INTERNATIONAL TRADE CROSSING FACTS _____________ 10 APPENDIX B: LIST OF ACRONYMS _____________________________________ 13 APPENDIX C: EMPLOYMENT __________________________________________ 14 Economic Contribution of Constructing the New International Trade Crossing v Center for Automotive Research ACKNOWLEDGEMENTS This report is the product of research performed by the Sustainability & Economic Development Strategies and the Transportation Systems Analysis groups at the Center for Automotive Research. Kim Hill Director, Director, Sustainability & Economic Development Strategies Richard Wallace, Director, Transportation Systems Analysis Debbie Maranger Menk, Senior Project Manager Joshua Cregger, Industry Analyst This report is the result of a group effort. The authors would also like to acknowledge the significant efforts of Diana Douglass. Diana contributed greatly to the production of the document. This study was funded by the Michigan Manufacturers Association and the Consulate General of Canada in Detroit. Additional support was provided by the Detroit Regional Chamber. Center for Automotive Research 3005 Boardwalk, Suite 200 Ann Arbor, MI 48108 734.662.1287 www.cargroup.org Economic Contribution of Constructing the New International Trade Crossing vi Center for Automotive Research EXECUTIVE SUMMARY Canada and the State of Michigan have proposed the construction of a new bridge connecting Detroit, Michigan, with Windsor, Ontario. The proposed new bridge has been met with both support and opposition on the Michigan side of the border. Therefore, the Center for Automotive Research (CAR) was asked by multiple stakeholders to assess the employment benefits to Michigan of constructing and operating the proposed new bridge across the Detroit River. In this study, CAR used an economic model to generate estimates of employment and economic contributions that will accrue to the region as a result of adding a second bridge—currently referred to as the New International Trade Crossing (NITC). This report documents the findings from CAR’s analysis. CAR’s research and analysis finds that building the NITC will add significantly to the employment base in the State of Michigan and to the Michigan economy more generally. This will occur through four mechanisms: Bridge construction o In Michigan, approximately 6,000 jobs created each of the first two years of construction and 5,100 jobs for each of the final two years of construction o Michigan gross state product increases by $1.5 billion1 per year for four years o Michigan personal income increases by $1.5 billion per year for four years o Michigan state revenues increase by $150 million per year for four years Statewide construction projects from match funding o $2.2 billion in federal matching funds made possible by the $550 million in funds provided to Michigan by Canada o Average 6,600 jobs created or retained per year for four years o Michigan personal income increases by $1.8 billion per year for four years o Michigan state revenues increase by $180 million per year for four years Bridge operations o Nearly 1,400 permanent jobs created for operation of the new bridge o Total contribution to Michigan gross state product of $130 million per year o Michigan personal income increases by $135 million per year o Michigan state revenues increase by $14 million per year New private investment o 6,800 permanent jobs created o Total contribution to Michigan gross state product of $630 million per year o Michigan personal income increases by $613 million per year o Michigan state revenues increase by $62 million per year 1 Unless otherwise noted, all dollar values are U.S. current dollars Economic Contribution of Constructing the New International Trade Crossing 1 Center for Automotive Research Economic Contribution of Constructing the New International Trade Crossing 2 Center for Automotive Research INTRODUCTION For several years, the governments of Michigan and Canada have been in discussions to construct a new bridge connecting Detroit, Michigan and Windsor, Ontario. Based on the results of several studies, including an Environmental Impact Statement (EIS), these governments identified a preferred corridor for the proposed bridge. The bridge project, formerly known as the Detroit River International Crossing (DRIC), is now officially named the New International Trade Crossing (NITC). (See Appendix A for basic information related to the NITC and the Michigan-Ontario border.) The Canadian government is fully committed to constructing the bridge. In Michigan, however, the proposed new bridge has proven to be more controversial. While business interests are aligned solidly behind the new bridge, as is Governor Snyder, the state legislature is divided. To inform the ongoing debate, the Center for Automotive Research (CAR) was asked to investigate the economic impacts of building the new bridge and related highway improvements in Michigan. CAR researchers used a standard economic model to generate new estimates of effects on employment and economic impacts that construction of a new crossing will have on the region. This report presents the results of CAR’s research and analysis and documents the projected employment impacts of constructing the NITC. For clarification of acronyms used in this report, see Appendix B. METHODS In completing its analysis of employment and other economic impacts of the NITC, CAR employed two primary methods: an extensive review of available literature and development of a regional economic impact model. Both of these approaches contributed to CAR’s findings. CAR’s analysis started with an extensive search and review of literature from multiple sources regarding the costs and societal benefits of constructing the NITC bridge. The findings from this literature search provided the data inputs used to estimate the economic and employment contributions associated with NITC construction and operations. A specially constructed regional economic impact model by Regional Economic Models, Inc. (REMI) of Amherst, Massachusetts was used for this analysis. Using this model, CAR researchers generated estimates of the economic and employment contributions associated with the new bridge construction and operations using investment dollars, as outlined in the Final Environmental Impact Statement and other studies, as the data input. This model was then adjusted to reflect the general characteristics of regional Economic Contribution of Constructing the New International Trade Crossing 3 Center for Automotive Research industries dependent on cross-border trade and traffic. The REMI model, which is well documented and has been peer-reviewed, was designed for the type of analyses employed in this current study and has been used by CAR and other organizations for more than two decades. This model allows for simulating the interaction among the regional economies of Ohio, Indiana, Michigan and the rest of the nation, providing for an accounting of interregional trade and migration. Therefore, the model can simulate economic impacts that may occur in any one region, resulting from changing activities in any or all of the regions. The general methodology in the analyses is to run baseline simulations for each region’s economy, then expected investment for construction activities and run another set of simulations. The difference between the simulations represents the impact of the investment. ESTIMATED EMPLOYMENT IMPACTS OF NITC The new bridge will support jobs through four means of economic impact: Bridge construction